What is better than cash you may ask? Electronic payments of course! Easy question, easy answer, anything else you need to know?

Actually, there is a lot more to it than that and that's why the Rural Finance Thematic Group and the Better than Cash Alliance held a seminar at IFAD on 21 August."Empowering people through electronic payments" . Tidhar Wald, from BTC walked the participants through an interesting presentation on why the alliance is convincing Governments, the development community and the private sector to shift their payments from cash to electronic – paving the way to expand financial inclusion and help people in poverty grow assets. Digitizing payments can create lasting benefits for people, communities and economies such as: cost savings, transparency, security, financial inclusion and access to new markets. Today, more than half the adult population – 2.5 billion – are excluded from the formal financial sector.

It seems that there is no question as to the efficiency that this shift would lead to, in fact, a stimulating discussion took place on the pros and cons of this shift and how challenging it will really be to replace a cash economy – 'cash is the way people think' …'a cash element will always remain' …'we have a long way to go to make services available to the local people ' these were just some of the comments made.

Although there are challenges, there are benefits too... Governments can save up to 75% when making payments electronically rather than in cash, on what? Corruption, theft, insurance costs, less middlemen – all these and other factors drastically increase savings as the costs incurred with cash no longer exist.

Mainly BTC aims to see donors committing to implement electronic payment solutions instead of cash. Another aim is for improved economic security for millions of low-income and poor people, enabling them to use bank or electronic accounts to build savings and assets via innovative payment technologies.
IFAD has been invited to become a member of the Better than Cash Alliance and the process to reach a decision has started. Current partners of the Alliance are: The Bill & Melinda Gates Foundation, MasterCard, Citi, The Ford Foundation, Omidyar Network, The United States Agency for International Development (USAID), and Visa Inc., and the United Nations Capital Development Fund (UNCDF) as the Secretariat of the Alliance.

In fact, IFAD is already using electronic payments so what would our actual role be? To showcase IFAD’s leadership in its process to accelerate digitization of payments and jointly promote greater use of secure, sound electronic payments in the world.

Did you know? Another reason not to use cash - cash is unhygenic and 94% of all paper bills are contaminated - with drugs and dangerous germs!

I think it is the perfect timing for IFAD to become a member of the Better Than Cash Alliance. This would demonstrate our commitment to encourage the migration of cash payments to electronic payments (e-payments) in government programmes and projects – not only those focusing on inclusive rural financial services - supported by IFAD under respective funding agreements. We could also demonstrate how we keep on pushing the frontier of rural finance outreach to our target group by applying mobile money services, where governments deem such transition from cash to electronic money appropriate after considering co-financed programmes and target beneficiaries.As we are engaging in the post-2015 process and leverage our strategic partnerships with likeminded agencies, such as FAO and WFP and the United Nations Secretary General’s Special Advocate (UNSGSA) for Inclusive Finance for Development in the development of the SDGs, joining the BTCA would also constitute an additional element in IFAD’s global networking effort. While IFAD being in the midst of the 10th replenishment negotiations, IFAD has gained recognition as an implementing agency of the Global Platform for Financial Inclusion (GPFI) as a “systematic structure for implementing the G20 Financial Inclusion Action Plan” together with the Bill and Melinda Gates Foundation, IFC, etc.. Working with the BTCA we showcase our leadership in promoting digitization of payments and greater use of secure, sound electronic payments as an option for the financially excluded parts of the rural society. It fits perfectly into our mission to eradicate poverty, develop sustainable agriculture, food security and nutrition. The other important development objectives which we can address by electronic payments for financial inclusion is to achieve rural economic growth, employment and infrastructure, gender equality and women's empowerment.

Expanding the use of digital payments such as mobile money and electronic transfers in developing countries could spur economic growth and ease income inequality, while advancing towards the G20’s goal to bring financial services to an estimated 2.5 billion adults who are excluded from the formal banking sector. Read more

About IFAD

The International Fund for Agricultural Development (IFAD) invests in rural people, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, we have provided grants and low-interest loans to programmes and projects that have reached several hundred million people. IFAD is an international financial institution and a specialized United Nations agency based in Rome – the UN’s food and agriculture hub.

Disclaimer

The opinions expressed in this blog are those of the authors and do not necessarily represent those of the International Fund for Agricultural Development (IFAD). The designations employed and the presentation of material in this blog do not imply the expression of any opinion whatsoever on the part of IFAD concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The designations “developed” and “developing” countries are intended for statistical convenience and do not necessarily express a judgement about the stage reached by a particular country or area in the development process.